ValueCommerce (TSE:2491) Is Paying Out Less In Dividends Than Last Year

ValueCommerce Co., Ltd.'s (TSE:2491) dividend is being reduced from last year's payment covering the same period to ¥22.00 on the 2nd of September. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

View our latest analysis for ValueCommerce

ValueCommerce's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by ValueCommerce's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 4.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥7.50 in 2014 to the most recent total annual payment of ¥42.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. ValueCommerce has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. ValueCommerce has impressed us by growing EPS at 14% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

ValueCommerce Looks Like A Great Dividend Stock

Overall, we think that ValueCommerce could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, ValueCommerce has 3 warning signs (and 1 which is a bit concerning) we think you should know about. Is ValueCommerce not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.